The blockchain as a disruptive technology Flashcards
What does Rico cite as being a reason for the sluggish growth in IoT?
Transaction costs - IoT devices may require many small transactions, which is unfavourable since transaction fees may exceed transaction amounts.
Name two early cryptocurrencies.
Digicash and eGold.
Why might cryptocurrencies have become more popular in recent years?
There are two possible reasons. One is that they have become a speculative good, and the other is that some buyers may prefer a non-centralised third party to execute their transactions.
How does Ethereum differ from Bitcoin?
The Ethereum Blockchain transfers the benefits of Bitcoin’s blockchain to other agreements beyond monetary ones, such as contracts, bets, and votes.
How does a node process a bitcoin transaction?
It receives transaction requests in its inbox until the requests accumulate to a certain size (1MB). This set of transactions is known as a block. The nodes then attempt to solve the hash puzzle associated with the block. The first node to solve the puzzle broadcasts its solution, and other nodes decide whether to accept the solution. The block must be formatted correctly, contain a hash reference to the previous block, hold a time-stamp, contain only signed transactions, and contain the solution to its corresponding puzzle. If this criteria are satisfied, the other nodes in the network add the block to the blockchain.
Why should a node check that another node’s add request has been solved correctly?
Because if it has not been, then the receiving node could still win the fee associated with solving the puzzle.
What is hash linking?
Linking together blocks by having each block contain the hash of its predecessor’s data.
Why does hash linking enhance the blockchain’s security?
Because it prevents individual blocks from being tampered with - if the information in a node is adulterated, then the hash link between its successor and itself will be broken.
What are the technical limitations of the blockchain?
It lacks privacy - transaction history is stored indefinitely and is accessible by all nodes.
If a user loses their private key, they lose their account.
Size problems - small networks can easily be hijacked by 51% attacks, whereas in large networks big players may force small ones out of business.
Scalability problems - large blockchains require lots of data to be transferred between nodes.
Energy usage - bitcoin mining is energy-intensive, and currently uses about 2% of what the UK uses in a year.
What is IOTA?
An alternative cryptocurrency to bitcoin, that differs in its operating mechanism. In an IOTA transaction, the sender must verify two other transactions before its transaction is processed. Once a transaction has accumulated a sufficient number of verifications, it is accepted.
How public-private key cryptograpy used in Bitcoin?
Each user is granted a public-private key pair. The public key is shared with other nodes on the network. When the user makes a transaction, they hash the transaction using their private key, and send out this digest along with the transaction information itself. Receivers of the transaction then decrypt the digest using the user’s public key, and check that it matches the transaction. If the two match, then the transaction is genuine.
What is a pseudo-random function?
A function that is highly nonlinear - changing the input by even a single value will result in an entirely different output.
What is hash puzzle that must be solved for a miner to win a block?
Nonce incrementation - incrementing the input to the hash function until the output has the same number of preceding zeros as the puzzle’s hash.
